How digital skills drive economic and workforce mobility in India
India’s IT sector fueled economic mobility as digital skills training expanded, raising wages and career prospects for women and disadvantaged groups
Between 2005 and 2011, India's information technology sector emerged as a transformative force for economic mobility. The nation became a global hub for IT services despite only 25% of households having computer access. This digital transformation created particular opportunities for women and disadvantaged groups, with business process outsourcing firms providing new career pathways through digital skills training.
This transformation reflects a significant shift in India's labour market dynamics. While computer literacy remained almost non-existent for over 90% of India's population in the early 2000s, targeted digital skills programs began changing this landscape. Even as developed countries reported nearly 73% of households had computers by 2011, developing nations like India saw much lower rates of digital adoption. However, this digital gap created an opportunity for significant economic gains when workers acquired computer skills.
The impact has been particularly significant in India's booming technology sector. Despite lower overall digital adoption rates, India emerged as a global hub for technically qualified personnel in the information technology industry, demonstrating how digital skills could create economic opportunities even in regions with historically limited access to technology.
The link between digital skills and wage increases
This pattern of digital skills driving economic empowerment has now been validated by rigorous research. A groundbreaking study revealed digital skills delivered an average 17% wage increase for workers in India, with even higher returns for traditionally disadvantaged groups. The research, forthcoming in Production and Operations Management, provided evidence that computer literacy created new economic opportunities, particularly for women and individuals from lower socioeconomic backgrounds.
The study's authors included Che-Wei Liu from Indiana University's Kelley School of Business, Terence Saldanha from University of Georgia's Terry College of Business, and Sunil Mithas from University of South Florida's Muma College of Business and a Visiting Professorial Fellow at UNSW Business School. Their analysis drew on comprehensive data from the Indian Human Development Survey conducted across two waves in 2005 and 2011, providing a robust longitudinal view of how digital skills reshape economic opportunities in emerging markets.
The study, Can Digital Skills Empower Disadvantaged Castes and Women? Evidence From India, examined data from more than 20,000 individuals across all Indian states between 2005-2011, tracking how computer literacy impacted wages across different demographic groups. The researchers found digital skills helped workers move into higher-skilled occupations, creating a clear pathway for career advancement.
"Movement up the skilled occupation ladder is a mechanism that mediates the relationship between digital skills and wages," the study revealed. This finding highlighted how computer literacy opened doors to new types of work beyond traditional manual labour roles. Furthermore, they noted that digital skills positively influence wages by expanding an individual's professional networks and increasing their access to information resources that help them obtain relevant skills and training to boost their earning potential.
This research is part of a broader research program to understand the impact of digital India and other related programs. Prof. Mithas said this program was launched by the Indian Government and its Department of Science and Technology with a view to improving human capacity and critical social infrastructure through the promotion of science, technology, research, and innovation. The researchers were interested in exploring how digital skills interact with social harmony, and traditional caste-based communications and exchanges in creating societal impact in terms of wages, income mobility, entrepreneurship, and intergenerational mobility.
Breaking down social barriers
The impact proved especially significant for historically disadvantaged groups. The research demonstrated the positive returns to digital skills are greater for individuals from the lowest castes than for individuals from other castes. Women also experienced outsized benefits, with the study finding the returns to digital skills are greater for women than for men.
This transformation occurred because digital skills enable them to develop social connections that may improve their career potential, thereby circumventing discriminatory social structures that have historically denied them such opportunities, the researchers explained. The study found this effect was particularly pronounced for women from lower castes, who experienced the highest relative wage increases from digital skills acquisition. This group saw higher returns than the general population, suggesting digital literacy serves as a powerful equalising force in the labour market.
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The researchers identified that digital skills proved particularly valuable because they enabled remote work and reduced the impact of physical mobility constraints. "Women in India are hindered by socio-cultural norms that impose location constraints; thus, by enabling women to access labour markets not constrained by location, digital skills offer women another avenue to improve their wages," the study noted. This flexibility created new economic opportunities that were previously inaccessible due to social and cultural barriers.
Infrastructure remains critical
The study highlighted important limitations, finding "the returns to digital skills are lower in regions with less developed infrastructure and lower literacy rates than in other regions." This underscored the need for continued investment in both digital and physical infrastructure to maximise the economic benefits of computer literacy programs.
The researchers identified that states known as 'BIMARU' (Bihar, Madhya Pradesh, Rajasthan, and Uttar Pradesh) showed significantly lower returns on digital skills investment. "We find a negative and significant coefficient of the interaction of digital skills with BIMARU, implying that the returns to digital skills are lower in BIMARU states than in other states," the study revealed. This finding highlighted how basic infrastructure – reliable electricity, internet connectivity, and educational resources – forms an essential foundation for digital transformation.
The disparity between regions demonstrated that digital skills training alone is insufficient. Success requires a holistic approach that includes the development of supporting infrastructure. The research showed that in areas with more developed infrastructure, such as major technology hubs like Bangalore and Hyderabad, workers achieved substantially higher returns from their digital skills. This pattern suggests that policymakers in the Modi government need to consider infrastructure development alongside digital skills training when designing economic development programs. Interestingly, Prof. Mithas observed that Prime Minister Narendra Modi government’s is emphasising scale, scope, speed and skills in its vision for infrastructure investments.
Key insights for policymakers and business leaders
Beyond the implications for policymakers for investing in digital skills, the research highlighted the transformative power of digital skills training for organisations operating in emerging markets. Companies that invest in computer literacy programs, particularly for disadvantaged groups, can tap into previously underutilised talent pools while driving social mobility.
The findings suggest several practical strategies for businesses. First, companies should consider targeted digital training programs that specifically focus on women and disadvantaged groups, as these populations showed the highest returns on skill development. Second, organisations should look beyond major urban centres when establishing operations, as digital skills can enable effective remote work arrangements. Third, businesses should consider partnering with local institutions to develop digital infrastructure alongside skills training, as the research showed these elements work in tandem to drive economic outcomes.
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"Our findings suggest that digital skills are a means for sections of society that grapple with disadvantages related to caste or gender to improve their incomes and economic status in society," noted the researchers, who pointed to the potential for businesses to combine commercial success with positive social impact through strategic investment in digital skills development.